The most prestigious Boston hospitals are paid 15-60% more per procedure, but are not especially healthier: Call it the best-kept secret in Massachusetts medicine: Health insurance companies pay a handful of hospitals far more for the same work even when there is no evidence that the higher-priced care produces healthier patients. …
"One influential researcher found that Beth Israel's overall mortality rate was lower in 2005 than the mortality rates at both the Brigham and Mass. General, but the hospital and its doctors still earn 15 percent to 20 percent less for the same work. "
Does the study control for the complexity of procedures performed or the prior health of the patients being treated? Name brand medical centers often take care of patients with far more complex medical problems than your typical hospital. Lower-tier hospitals even transfer difficult cases into the hands of top-tier centers -- and in many cases hand over complete train-wrecks to top centers in hopes that they'll be able to clean things up. Looking at mortality rates alone is misleading at best.
"State health officials have tried to encourage women like Dahl to reconsider their flight to Boston, pointing out in a 2003 study that community hospitals are generally just as reliable as teaching hospitals for normal births."
The study refers only to "normal" births. Of course, it's impossible to know in advance whether you will have a "normal" birth. That's why you consider going to a well-known hospital. For example, what if your baby needs emergency treatment upon delivery and the community hospital is not adequately staffed to provide it? You generally don't have a heck of a lot of time. Are you really willing to roll the dice on the well-being of your baby?
There's no doubt that one typically has to pay a premium to get treatment at top-tier medical centers (at the same time, these centers are not as much in the habit of denying patient care because of insurance reimbursement issues as a private practice might be). There's also no doubt that name brand medical centers are far from perfect. I can't tell what, if any, premium you should be paying. But to cite some dubious studies that leaves out valuable information is highly misleading.
Explanation 2 basically asserts that Distortion A causes Distortion B with no description of the actual causal mechanism. Even if it's correct, it doesn't actually explain anything until more detail is provided.
I wasn't trying to provide a competing explanation, I was warning Mr. Hanson against using the medical sector of all sectors as a test case for his novel ideas. He notices that people don't do what one would normally expect in a regular market: prefer the cheaper over the more expensive (for a given level of quality) and choose the better over the worse (for a given price). But this is precisely the sort of departure one should expect in response to government interference that makes it extremely difficult compare prices and compare quality. It's difficult even to know the price of the procedure one is about to receive. Doctors certainly are not eager to share it with you, and even if they did, you get multiple bills (or your insurance does) from various providers - not just the doctor but the hospital and the anesthesiologists, for instance. You receive one bill, you pay it off, and you think you're done, but then you receive another, and another. You don't know it's all paid off until you stop receiving bills. And the bills are incomprehensible, and some of the items are outrageous - hundreds of dollars just to lie semi-conscious in a room for a couple of hours after surgery, for example. This is nothing like a typical capitalist market sector. Of course it's hard for people to act as a microeconomist would normally expect. And I haven't even mentioned the shielding effect of insurance (which is strongly encouraged by tax policy) on all this. As far as reputation, Beth Israel has a fantastic reputation, thought of very highly (I live in the area), whereas I have no such impression of Mass. General, so the notion that Beth Israel is lower status than Mass. General strikes me as being nothing other than an arbitrarily inserted presupposition to fit with the observed difference in payments. Just find the highest-paid hospital, call it "high status", and voila, you have your explanation.
Constant, your theory that everything government touches is "strange" seems too weak to be of much use.
It is not a theory but a reminder that the economy is not happening in laboratory conditions. Physicists isolate what they're studying very carefully from uncontrolled variables. Economists, understandably, cannot do this, but for this reason they should be mindful of them. I did not notice any manifestations of such mindfulness. On the contrary: a reminder to be mindful has been rejected as not "of much use".
The theory that people seek connections with high status people leads to lots of concrete expectations.
Maybe, maybe not. Look at what people are moving in the direction of to a degree that is not accounted for by your initial model, label it "high status", and voila, you have your "concrete expectation" that people are moving in that direction.
I'm also skeptical that these studies are really all that accurate.
How much of the data is self-reported by hospitals? What if their reporting procedures are different? Are they controlling for all the relevant variables? What if the people in the more prestigious hospital tend to be sicker than others? I'd bet they tend to be older, since older people tend to be wealthier and more able to afford expensive medicine. How well can they control for the severity of the conditions?
I just can't see really sick people caring about prestige. All the really sick people I've been around didn't. They just wanted to get better, and to get better as quickly as possible.
I agree with Tomasz. There is obviously some correlation between prestige and quality of care, e.g. most people don't go to witch doctors and faith healers. I can believe that this correlation is very low, because people do prefer to associate with others of higher status and are willing to pay for this privilege. What I find much more difficult to accept is that they would risk their own health to do so.
One problem that I've run into myself is that it is very hard for a layman to get a hold of data on health outcomes (for procedures or hospitals).
I confess I haven't read the article, so maybe I missed something. But what justifies your belief here?
Yes patients want prestigious docs and hospitals, and they may believe that high status docs are healthier, but I doubt that belief causes their demand; causation most likely goes the other way.I think that I as a consumer rely on a general rule to the effect of "more expensive --> better quality", especially in fields like medicine where, relative to other services, I would expect the wealthy to care more about actual effectiveness. Even if I'm wrong to expect that the wealthy think that way, or about the implication "more expensive --> better quality" in general, still this belief would influence my buying choices. In the aggregate, this would add to the demand of more-expensive hospitals. So the additional cost of some hospitals would really be due to a perception that they provide better service, not to my desire to affiliate with high-status docs.
Certainly status could explain why one hospital, rather than another, became more expensive in the first place. But once it is more expensive, I would expect patients' desire for better care to keep it that way, even in the absence of any evidence besides the price that the care there is better.
Why do you think that going to high-status hospitals despite the facts is caused by desire to associate with high status, rather than stubborn inability to change one's visceral opinion about quality of service in response to evidence? The latter looks more plausible to me, is there a fact to change my mind on that? Nontrivial evidence isn't believed, people may ostensibly agree with it, but make decisions on a cherished gut feeling that wasn't moved.
I'd say the patients are perfectly rational. They don't have good information on quality of healthcare, so they use proxies like prestige and price. As long as there's a non-negligible positive correlation between these proxies and quality, what patients are doing is perfectly rational, especially since there are good reasons to be very risk-averse with healthcare.
Or are you saying the correlation between quality of healthcare and prestige/price as averaged over all healthcare providers is negative or very definitely exactly zero? I seriously doubt that.
Maybe people like going to the expensive, prestige hospitals because they feel like, if things go wrong, they are allowed to complain. Also, the hospital would want to keep these high-paying customers so the customer service may be better.
Robin -- doctors at the academic hospitals -- especially top hospitals -- are often super-super-super specialized. It is economically inefficient, but it lets 1 person become an expert on a particular disease, surgery, or procedure, and to study and try and advance it. If you're a healthy 35 year old or have a common disease, the benefit is probably non-existent to marginal. However if you have a rare disease, that most physicians only see 1 or 2 in their careers, you'd probably be better off going to an academic center where someone has seen 100 patients just like you. Similarly if you have a common disease that has done something peculiar, at an academic center, there will be someone who is familiar with it.
@retired urologist: I think the quality of care you can receive for common interventional procedures is probably equivalent at top community centers (maybe even superior) than at an academic center. However, for elective procedures (lots of cath, angioplasty, CABG, spine surgery, low risk prostate) -- I really, really have to wonder whether the risks and benefits to intervene (and generate $$$) is provided to the patient in the most honest way. Although the outcome is good -- the question of whether or not you even needed the intervention -- and where you'll get an honest answer on that, is a whole other story. At least at some academic centers, there will be people conducting trials on said intervention, and whether or not it helps.
frelkins, paying all the hospitals the same amount would go a long way; don't expect much support for that though; people like high status folks being paid more.
"this hypothesis predicts education will have little effect"
Indeed, only increasing the status of the actually safer and cheaper community hospital will work, it seems. Considering the enormous difference in medical prices between the high-status and lower-status hospital, this should turns out to be a strangely urgent piece of health care policy.
How to increase the status of the community hospital - have the city or state give out awards to place on the hospital's website? Have the hospital run ads announcing these awards? Run ads highlighting its most accomplished doctors and telling success stories? Painting the rooms is more fashionable colors and upgrading the decor?
Diogenese, if even the best research can't disentangle these effects, what basis does the average patient have for believing prestigious hospitals are more healthy?
Nazgul, this hypothesis predicts education will have little effect.
My one quibble is to question how much status people actually gain by going to certain hospitals. I've heard that some chimpanzees are willing to "pay" to be able to look at high-status chimps. I don't think looking actually raises their status though.
Robin -- have you noticed that observational studies in medicine are often overturned by randomized controlled trials? Its not because the observational studies didn't employ the fanciest techniques in statistics to control for disease stage or acuity --- its because the techniques we have for measuring this stuff just aren't accurate enough.
I know economists believe they can control for confounding -- it just amuses me how they ignore the ridiculous number of well conducted large observational studies that have been overturned. I'm sure you plan on contrasting the level of evidence in Medicine vs. Economics at one point.
Patients might be matched on 5 variables -- but any one of 100 to 500 other features might obviously indicate to any health care professional that one patient is much, much sicker than the other. Anyone who has ever taken care of a person who is sick or talked with someone who has knows this.
The absolute sickest patients are the ones transferred to tertiary care centers. This is the way those hospitals work. It doesn't matter what you control for -- its just gonna be absolutely MEANINGLESS. Garbage in, garbage out.
"One influential researcher found that Beth Israel's overall mortality rate was lower in 2005 than the mortality rates at both the Brigham and Mass. General, but the hospital and its doctors still earn 15 percent to 20 percent less for the same work. "
Does the study control for the complexity of procedures performed or the prior health of the patients being treated? Name brand medical centers often take care of patients with far more complex medical problems than your typical hospital. Lower-tier hospitals even transfer difficult cases into the hands of top-tier centers -- and in many cases hand over complete train-wrecks to top centers in hopes that they'll be able to clean things up. Looking at mortality rates alone is misleading at best.
"State health officials have tried to encourage women like Dahl to reconsider their flight to Boston, pointing out in a 2003 study that community hospitals are generally just as reliable as teaching hospitals for normal births."
The study refers only to "normal" births. Of course, it's impossible to know in advance whether you will have a "normal" birth. That's why you consider going to a well-known hospital. For example, what if your baby needs emergency treatment upon delivery and the community hospital is not adequately staffed to provide it? You generally don't have a heck of a lot of time. Are you really willing to roll the dice on the well-being of your baby?
There's no doubt that one typically has to pay a premium to get treatment at top-tier medical centers (at the same time, these centers are not as much in the habit of denying patient care because of insurance reimbursement issues as a private practice might be). There's also no doubt that name brand medical centers are far from perfect. I can't tell what, if any, premium you should be paying. But to cite some dubious studies that leaves out valuable information is highly misleading.
Explanation 2 basically asserts that Distortion A causes Distortion B with no description of the actual causal mechanism. Even if it's correct, it doesn't actually explain anything until more detail is provided.
I wasn't trying to provide a competing explanation, I was warning Mr. Hanson against using the medical sector of all sectors as a test case for his novel ideas. He notices that people don't do what one would normally expect in a regular market: prefer the cheaper over the more expensive (for a given level of quality) and choose the better over the worse (for a given price). But this is precisely the sort of departure one should expect in response to government interference that makes it extremely difficult compare prices and compare quality. It's difficult even to know the price of the procedure one is about to receive. Doctors certainly are not eager to share it with you, and even if they did, you get multiple bills (or your insurance does) from various providers - not just the doctor but the hospital and the anesthesiologists, for instance. You receive one bill, you pay it off, and you think you're done, but then you receive another, and another. You don't know it's all paid off until you stop receiving bills. And the bills are incomprehensible, and some of the items are outrageous - hundreds of dollars just to lie semi-conscious in a room for a couple of hours after surgery, for example. This is nothing like a typical capitalist market sector. Of course it's hard for people to act as a microeconomist would normally expect. And I haven't even mentioned the shielding effect of insurance (which is strongly encouraged by tax policy) on all this. As far as reputation, Beth Israel has a fantastic reputation, thought of very highly (I live in the area), whereas I have no such impression of Mass. General, so the notion that Beth Israel is lower status than Mass. General strikes me as being nothing other than an arbitrarily inserted presupposition to fit with the observed difference in payments. Just find the highest-paid hospital, call it "high status", and voila, you have your explanation.
Constant, your theory that everything government touches is "strange" seems too weak to be of much use.
It is not a theory but a reminder that the economy is not happening in laboratory conditions. Physicists isolate what they're studying very carefully from uncontrolled variables. Economists, understandably, cannot do this, but for this reason they should be mindful of them. I did not notice any manifestations of such mindfulness. On the contrary: a reminder to be mindful has been rejected as not "of much use".
The theory that people seek connections with high status people leads to lots of concrete expectations.
Maybe, maybe not. Look at what people are moving in the direction of to a degree that is not accounted for by your initial model, label it "high status", and voila, you have your "concrete expectation" that people are moving in that direction.
I'm also skeptical that these studies are really all that accurate.
How much of the data is self-reported by hospitals? What if their reporting procedures are different? Are they controlling for all the relevant variables? What if the people in the more prestigious hospital tend to be sicker than others? I'd bet they tend to be older, since older people tend to be wealthier and more able to afford expensive medicine. How well can they control for the severity of the conditions?
I just can't see really sick people caring about prestige. All the really sick people I've been around didn't. They just wanted to get better, and to get better as quickly as possible.
I agree with Tomasz. There is obviously some correlation between prestige and quality of care, e.g. most people don't go to witch doctors and faith healers. I can believe that this correlation is very low, because people do prefer to associate with others of higher status and are willing to pay for this privilege. What I find much more difficult to accept is that they would risk their own health to do so.
One problem that I've run into myself is that it is very hard for a layman to get a hold of data on health outcomes (for procedures or hospitals).
I confess I haven't read the article, so maybe I missed something. But what justifies your belief here?
Yes patients want prestigious docs and hospitals, and they may believe that high status docs are healthier, but I doubt that belief causes their demand; causation most likely goes the other way.I think that I as a consumer rely on a general rule to the effect of "more expensive --> better quality", especially in fields like medicine where, relative to other services, I would expect the wealthy to care more about actual effectiveness. Even if I'm wrong to expect that the wealthy think that way, or about the implication "more expensive --> better quality" in general, still this belief would influence my buying choices. In the aggregate, this would add to the demand of more-expensive hospitals. So the additional cost of some hospitals would really be due to a perception that they provide better service, not to my desire to affiliate with high-status docs.
Certainly status could explain why one hospital, rather than another, became more expensive in the first place. But once it is more expensive, I would expect patients' desire for better care to keep it that way, even in the absence of any evidence besides the price that the care there is better.
Why do you think that going to high-status hospitals despite the facts is caused by desire to associate with high status, rather than stubborn inability to change one's visceral opinion about quality of service in response to evidence? The latter looks more plausible to me, is there a fact to change my mind on that? Nontrivial evidence isn't believed, people may ostensibly agree with it, but make decisions on a cherished gut feeling that wasn't moved.
I'd say the patients are perfectly rational. They don't have good information on quality of healthcare, so they use proxies like prestige and price. As long as there's a non-negligible positive correlation between these proxies and quality, what patients are doing is perfectly rational, especially since there are good reasons to be very risk-averse with healthcare.
Or are you saying the correlation between quality of healthcare and prestige/price as averaged over all healthcare providers is negative or very definitely exactly zero? I seriously doubt that.
Maybe people like going to the expensive, prestige hospitals because they feel like, if things go wrong, they are allowed to complain. Also, the hospital would want to keep these high-paying customers so the customer service may be better.
"This is a teaching hospital; you're here to learn. We could call it a learning hospital, but that would scare the patients." -- 'Gideon's Crossing'
Robin -- doctors at the academic hospitals -- especially top hospitals -- are often super-super-super specialized. It is economically inefficient, but it lets 1 person become an expert on a particular disease, surgery, or procedure, and to study and try and advance it. If you're a healthy 35 year old or have a common disease, the benefit is probably non-existent to marginal. However if you have a rare disease, that most physicians only see 1 or 2 in their careers, you'd probably be better off going to an academic center where someone has seen 100 patients just like you. Similarly if you have a common disease that has done something peculiar, at an academic center, there will be someone who is familiar with it.
@retired urologist: I think the quality of care you can receive for common interventional procedures is probably equivalent at top community centers (maybe even superior) than at an academic center. However, for elective procedures (lots of cath, angioplasty, CABG, spine surgery, low risk prostate) -- I really, really have to wonder whether the risks and benefits to intervene (and generate $$$) is provided to the patient in the most honest way. Although the outcome is good -- the question of whether or not you even needed the intervention -- and where you'll get an honest answer on that, is a whole other story. At least at some academic centers, there will be people conducting trials on said intervention, and whether or not it helps.
I just put an added on the post.
frelkins, paying all the hospitals the same amount would go a long way; don't expect much support for that though; people like high status folks being paid more.
@Robin
"this hypothesis predicts education will have little effect"
Indeed, only increasing the status of the actually safer and cheaper community hospital will work, it seems. Considering the enormous difference in medical prices between the high-status and lower-status hospital, this should turns out to be a strangely urgent piece of health care policy.
How to increase the status of the community hospital - have the city or state give out awards to place on the hospital's website? Have the hospital run ads announcing these awards? Run ads highlighting its most accomplished doctors and telling success stories? Painting the rooms is more fashionable colors and upgrading the decor?
Diogenese, if even the best research can't disentangle these effects, what basis does the average patient have for believing prestigious hospitals are more healthy?
Nazgul, this hypothesis predicts education will have little effect.
My one quibble is to question how much status people actually gain by going to certain hospitals. I've heard that some chimpanzees are willing to "pay" to be able to look at high-status chimps. I don't think looking actually raises their status though.
Robin -- have you noticed that observational studies in medicine are often overturned by randomized controlled trials? Its not because the observational studies didn't employ the fanciest techniques in statistics to control for disease stage or acuity --- its because the techniques we have for measuring this stuff just aren't accurate enough.
I know economists believe they can control for confounding -- it just amuses me how they ignore the ridiculous number of well conducted large observational studies that have been overturned. I'm sure you plan on contrasting the level of evidence in Medicine vs. Economics at one point.
Patients might be matched on 5 variables -- but any one of 100 to 500 other features might obviously indicate to any health care professional that one patient is much, much sicker than the other. Anyone who has ever taken care of a person who is sick or talked with someone who has knows this.
The absolute sickest patients are the ones transferred to tertiary care centers. This is the way those hospitals work. It doesn't matter what you control for -- its just gonna be absolutely MEANINGLESS. Garbage in, garbage out.
does the only possible arbitrage here involve educating people?